Determine the economic value to the customer

Assignment Help Accounting Basics

Reference no: EM132749667

Question - Fridges 4 Cafes Pty Ltd is developing a new type of commercial refrigerator called the Cold Master, that it plans to sell to Café's and restaurants. Currently the market leader is a product called Cool Maid which is sold by a competitor. The managing director of Fridges 4 Cafes Pty Ltd has engaged a market research agency to help assess the appropriate selling price for the new fridge.

The agency has surveyed the market and determined the following data for the market leading fridge - the Cool Maid:

Selling Price $25,000 Installation Costs $400 Yearly maintenance cost $1,500 Expected useful life 6 years Disposal value zero

Engineering studies have determined that the Cold Master will require maintenance costs of $900 per annum and will have a useful life of nine years with a disposal value of zero. In addition, the new product has a higher energy rating than the Cool Maid so will use less electricity. The value of this improved functionality to the customer is estimated at $800. Customers will need to incur an average installation cost for the Cold Master of $500 per unit.

REQUIRED -

(a) Determine the economic value to the customer of the Cold Master by comparing against the Cool Maid (Do not consider the time value of money).

(b) What price should Fridges 4 Cafes Pty Ltd charge for the new product? Explain your answer.

Reference no: EM132749667

Questions Cloud

What mean by circular economics : How Circular Economics effects operation practice in organization?

Evaluate the celadon group inc accounting fraud : Was the incident an instance of measurement error or measurement bias? What action did the company take that resulted in error or bias?

Summarize the financial strengths of the business : Summarize the financial strengths of the business and justify your analysis based on evidence in the statement of cash flows. Include discussion of whether.

Organizational strategy and information strategy : The Information Systems Strategy Triangle shows a direct relationship between organizational strategy and information strategy.

Determine the economic value to the customer : Determine the economic value to the customer of the Cold Master by comparing against the Cool Maid (Do not consider the time value of money)

Explain the purpose of the australian consumer law : 1. Explain the purpose of the Australian Consumer Law and how it protects consumers' rights.

Uw erm adoption and implementation : What were some of the key factors in the early states of UW's ERM adoption and implementation that led to its current success within the organization.

What would be the net realizable value of receivables : X Company started the year with a $3,600 balance in accounts receivable and a $300 balance in the allowance for doubtful accounts. The company had credit sales.

Determine the effectiveness of the leading edge program : What outcomes should the hospital collect to determine the effectiveness of the Leading Edge Program? What evaluation design should it use?

User Account

All Pages